Chime shares jump 10% as Stride deal puts fintech on path to bank charter

 Chime shares surged 10% before the bell ​on Wednesday after the fintech firm agreed to buy Stride for $590 million, gaining ‌a bank charter that would allow it to expand its lending business.

Over the past few years, Chime has emerged as a major challenger to traditional banking heavyweights, chipping away at their market share with ​app-based, low-cost financial services.

The Stride Bank deal, announced late on Tuesday, would ​take that challenge further, giving Chime more control over operations as it ⁠forays into products and services dominated by traditional lenders.

Wall Street analysts cheered the deal, ​with Piper Sandler saying it would improve Chime’s unit economics while giving it greater ​control over product development.

“We see this as a bold move with the potential to accelerate Chime’s market share,” analysts at William Blair wrote in a note.

THE BANK CHARTER RACE

A growing number of fintechs, ​neobanks and digital-asset firms are seeking bank charters as they look to expand their role ​in the financial system.

Stride, a nationally chartered bank, has been Chime’s partner for over seven years. ‌The ⁠fintech firm on Tuesday also raised its third-quarter and full-year forecasts for revenue and core profit growth.

Chime expects to keep its assets below $10 billion for the foreseeable future. Analysts see the threshold as key as it keeps it “Durbin-exempt,” meaning Chime is not subject ​to the debit-card fee ​caps imposed on ⁠banks under the 2010 Durbin amendment.

⁠banks under the 2010 Durbin amendment.

“Becoming a full-fledged bank should allow Chime to capture a higher share of wallet with customers, increasing ​its direct depositor base and solidifying the moat around its ​platform,” Evercore ⁠ISI analysts wrote.

Chime estimates the deal to generate over $100 million in net synergies, driven by lower sponsor bank fees, expanded lending products and a significantly lower cost of funds. The ⁠acquisition is ​expected to close in the first half of ​2027.

“The acquisition will support faster product innovation, increased member trust, a structural cost advantage and greater control,” Wolfe ​Research analysts wrote.

Source : Reuters